OPEC seeks oil alliance with Russia for next 10-20 years - Saudi crown prince

Saudi Crown Prince Mohammed bin Salman giving a speech during the Saudi-US Partnership Gala event in Washington, DC. (Photo: AFP via Saudi Royal Palace by Bandar Al-Jaloud)
Updated 28 March 2018

OPEC seeks oil alliance with Russia for next 10-20 years - Saudi crown prince

NEW YORK: Saudi Arabia and Russia are working on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.
Saudi Crown Prince Mohammed bin Salman said that Riyadh and Moscow were considering a deal to greatly extend a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices.
“We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” the crown prince told Reuters in an interview in New York late on Monday.
“We have agreement on the big picture, but not yet on the detail.”
Russia, not a member of the Organization of the Petroleum Exporting Countries, has worked alongside the 14-member group during previous oil gluts, but a 10 to 20 year deal between the two would be unprecedented.
Top OPEC producer Saudi Arabia recruited Russia and other non-OPEC countries to help drain oversupply when oil prices collapsed to below $30 a barrel in 2016 from over $100 in 2014.
Crude has since recovered to $70 but fast-rising output from US shale producers has capped prices.
“This is all about whether the arrangement is a short-term expedient to deal with this particular crisis in the oil market, or whether it reflects a realignment in world oil,” said oil historian Daniel Yergin, vice chairman at consultancy IHS Markit.
“OPEC countries want to find a way to institutionalize this relationship rather than to have it be a one-shot deal.”
Robert McNally at consultancy Rapidan Energy Group said Riyadh wanted help in breaking the boom-bust cycles that characterize oil markets by capping crude on the upside as well as by helping lift low oil prices.
“History shows that without a long-term, powerful, competent coherent, disciplined swing producer in the oil markets ... you get space-mountain oil prices. Wild volatility of the sort we have seen in the past 10 to 15 years and that Saudi Arabia and Russia do not want to see again,” McNally said.
He said that would require Russia to join Saudi in building spare production capacity to use when prices rise too much.
SAUDI, RUSSIA ALLIANCE “THICKER THAN OIL“
A long-term pact between Moscow and Riyadh would effectively co-opt Russia to the Saudi-led OPEC cartel while strengthening Russia’s hand in the Middle East where the United States has long been the dominant super-power.
News of the potential oil alliance came at a time when the two have been working to cement an economic relationship despite being at odds over the conflict in Syria, where they back opposing sides.
A meeting between the Saudi crown prince and Russian president Vladimir Putin on the sidelines of a G20 meeting in China in September 2016 was instrumental in bringing Russia on board to support OPEC, non-OPEC oil curbs.
Last October, Saudi King Salman became the first Saudi monarch to visit Russia, providing investment and political support for a Russian economy battered by Western sanctions.
“It is a very important strategic development,” Helima Croft at RBC Capital Markets said of a potential 10 to 20 year Saudi-Russia oil collaboration.
“First, the Crown Prince is making the statement, not the oil minister, one more clear sign that he (like Putin) is the final word on his country’s oil policy.
“Second it is one more sign of the major reversal in Saudi-Russia relations. Saudi was a staunch cold war ally of the US Now this Russia-Saudi alliance appears to be thicker than oil and seems to be driven by the personal affinity between Putin and MBS,” said Croft.
ARAMCO IPO LATE 2018, EARLY 2019
The crown prince predicted that world oil demand would not peak until 2040, despite advances in renewable energy technologies and the electric vehicle.
In an attempt to end Saudi Arabia’s reliance on oil, he is leading a push to diversify the Saudi economy away from oil and gas by 2030.
Riyadh plans to raise funds through the flotation of a 5 percent stake in state Saudi oil company Aramco. Time is running out for an initial public offering this year but the crown prince said the IPO could still take place at the end of 2018 or in early 2019, depending on financial market conditions.
Saudi Oil Minister Khalid Al-Falih said last week that documentation was ready but that a venue for the IPO had not yet been decided. The New York stock exchange is still in the running for the IPO, alongside London and Hong Kong, but Falih said there was a risk of a “frivolous” legal action if Aramco were listed in the United States.


Thunberg condemns climate inaction as Trump joins Davos

Updated 21 January 2020

Thunberg condemns climate inaction as Trump joins Davos

  • Business leaders are likely to be concerned by the state of the global economy
  • The IMF cut its global growth estimate for 2020 to 3.3 percent

DAVOS: Swedish teen activist Greta Thunberg on Tuesday slammed the business elite for doing “basically nothing” on climate change, as the Davos forum braced for an address from US President Donald Trump hours before his impeachment trial begins.

The 50th meeting of the World Economic Forum (WEF) in the Swiss Alps resort got under way seeking to thrash out dangers to both the environment and economy from the heating of the planet.

Trump, who has repeatedly expressed skepticism about climate change, is set to give the first keynote address of Davos 2020, on the same day as his impeachment trial opens at the Senate in Washington.

Before his appearance, Thunberg underlined the message that has inspired millions around the world, saying “basically nothing has been done” to fight climate change.

“It will require much more than this. This is just the very beginning,” the 17-year-old said.

Speaking calmly and with a wry smile, Thunberg acknowledged that her campaign which began with school strikes had attracted huge attention without yet achieving concrete change.

“There is a difference between being heard to actually leading to something,” she said.

“I am not the person who should complain about not being heard,” she said to appreciative laughter.

“I am being heard all the time. But the science and the voice of the young people are not at the center of the conversation.”

While the WEF and individual business leaders have been detailing their own concerns about climate change, Greenpeace complained in a new report that some of the world’s biggest banks, insurers and pension funds have collectively invested $1.4 trillion in fossil fuel companies since the Paris climate deal in 2016.

“Pretty much nothing has been done as global Co2 emissions have not been reduced. And that is of course what we are trying to achieve,” said Thunberg.

There are no expectations that Trump and Thunberg, who have exchanged barbs through Twitter, will actually meet, but the crowded venue and intense schedule mean a chance encounter cannot be ruled out.

When Trump and his entourage walked through UN headquarters last year at the annual General Assembly, a photo of the teenager staring in apparent fury at the president from the sidelines went viral.

Tweeting before arriving in Davos aboard his Marine One helicopter, Trump appeared in bullish mood, writing he would “bring Good Policy and additional Hundreds of Billions of Dollars back to the United States of America!”

Although Trump’s Republican party holds a majority in the Senate and is almost sure to acquit him on charges of abusing his power and obstructing Congress, the impeachment adds volatility to an already tense 2020 presidential election.

Sustainability is the buzzword at the Davos forum, which began in 1971, with heel crampons handed out to participants to encourage them to walk on the icy streets rather than use cars, and the signage paint made out of seaweed.

Trump’s opposition to renewable energy, his withdrawal from the Paris accord negotiated under his predecessor Barack Obama, and the free hand extended to the fossil fuel industry puts him at odds with this year’s thrust of the event.

“People are playing a lot more attention to” climate, Eurasia Group president Ian Bremner told AFP at Davos, adding there was “genuine action by some big players,” after investment titan BlackRock said it was partially divesting out of coal.

“But let’s be clear — a big part of this is because we failed for a very long time and governments continue to fail,” he added.

Business leaders are likely also to be concerned by the state of the global economy whose prospects, according to the International Monetary Fund, have improved but remain brittle.

The IMF cut its global growth estimate for 2020 to 3.3 percent, saying that a recent truce in the trade war between China and the US had brought some stability but that risks remained.

“We are already seeing some tentative signs of stabilization but we have not reached a turning point yet,” said IMF chief Kristalina Georgieva.

Activists meanwhile will be pressing for much more concrete action to fight inequality, after Oxfam issued a report outlining how the number of billionaires has doubled in the past decade and the world’s 22 richest men now have more wealth than all the women in Africa.